Month: November 2010

I have been trained in Risk-based Audit and one of those things that really struck me was what they call the ‘Fraud Triangle.’ Simply put, it explains the three things that makes any person commit fraud. I want to share this because for sure anyone of you doesn’t want to be intentionally deceived.

1. Opportunity
Remember this: Where there is unrestricted access to assets, there is opportunity. Assets can be characterized as cash, goods, inventory, personal records and so on. So you need to have an adequate set of internal controls to prevent fraud from happening.

2. Pressure
Pressure can be as petty as peer pressure or wanting to be on top of everyone in terms of material things to serious matters such as extensive debt, drug addiction and gambling.

3. Rationalization
Some rationalization examples are as follows;
“I don’t know how to face my family when they learn that we’ll lose our home, car, everything”
“I really need this money now and I know I can pay before anyone notices”
“I deserve more than what’s in my paycheck”

So you see, the perpetrator doesn’t have to have a ‘bad reputation’ because with these 3 factors present, even the best person you know can be one of them.